Coles lifts milk prices, but Woolworths and Aldi haven’t yet
About 3 weeks ago, Coles quietly lifted the price of Coles milk on its shelves by 10c/L to $4.80 for 3L, $3.30 for 2L and $1.70 for 1L. This caught many in the industry by surprise and is seen a real positive move by Coles. It shows that the dark days of $1/L are a distant memory and it is time for everyone in the industry, including me, to move on from this.
It shows that Coles is adjusting the price on shelf as required to meet the cost of getting milk into their stores. The market is working like all other products which is all the industry ever wanted.
It also highlights that Coles is a market leader in paying farmers a fair price for the milk. Many of my members in southern NSW have made it clear to me that Coles has had a very positive impact on their business in the past 4 years. And the next 3 years are positive given the contracts they have with Coles in a time of considerable uncertainty with milk prices especially in southern Australia.
At this stage, Woolworths and Aldi have not lifted their milk price to match Coles. A logical question is why? Perhaps they are playing games to try and get some brownie points with consumers at the expense of the dairy industry but will lift prices in the coming weeks?
Or perhaps Woolworths and Aldi do not have the same cost pressures since they pay farmers less for their milk? I think in many areas of Australia, especially where Coles has direct supply with dairy farmers, this is very likely to be the case.
Whatever the reason, Woolworths and Aldi are very unlikely to be making more than a very small margin on milk. Matching the Coles price increases would be a welcome move by the industry and would allow price increases to farmers and processors for milk at a time when costs are increasing substantially. It would also allow processors to increase their brands wholesale prices to allow further small price increases to processors and farmers.
So Woolworths and Aldi, please help the dairy industry by matching the Coles price increase.
Eric Danzi, CEO eastAUSmilk.
Biosecurity Levy – Coming to a Dairy Farm Near You?
The Federal Labor Government’s 2023 budget included what they are calling a Biosecurity Protection Levy, to contribute to the cost of biosecurity measures. The government’s proposition is that, because farmers are the beneficiary of biosecurity measures, they should contribute. It will be set at 10% of the 2020-2021 agricultural levy rates.
The government has called for submissions by 6 October 2023 about how the levy is to be introduced, but stressed they are not open to submissions rejecting it, and not open to major modifications.
eastAUSmilk is in the process of developing their views about how they respond to this narrow ‘invitation’. Other agricultural industry bodies are also considering their response, and it is clear some will reject the whole idea and will oppose the new impost.
This is not a levy. It is a fee, charge, excise, or tax and should be accurately labelled as such. This point is not merely semantic. The existing levy system collects funds for industry purposes, is overseen by industry representative bodies, and is generally supported by the agriculture sector. The Biosecurity Protection Levy will, on the other hand, be funnelled into consolidated revenue, will not necessarily be spent on biosecurity initiatives of relevance to industry, and there will be no industry oversight.
The Government’s own levy guidelines set out how a levy is introduced and managed, and this new budget measure is introduced in a way not countenanced by those guidelines.
eastAUSmilk is consulting with Australian Dairy Farmers, and with Queensland Farmers Federation and their affiliated organisations, in developing a response.
Mike Smith, eastAUSmilk Government Relations Officer
Saputo decision delayed
The Australian Competition and Consumer Commission has announced a delay in presenting their findings, on the proposed acquisition of two Saputo milk processing plants by Coles.
They were due to present their final findings on the proposed acquisition on Thursday 14 September, but have delayed their report indefinitely, pending receipt of further information from the parties, i.e. Coles and Saputo.
EastAUSmilk Chief Executive Officer Eric Danzi said that eastAUSmilk had several times during the ACCC review made submissions raising possible consequences of a completely unregulated acquisition. eastAUSmilk had urged the ACCC to ensure, if the acquisition proceeded, that conditions were attached to it which protected dairy farmers and other milk processors from the effects of reduced competition which would arise.
In July this year, ACCC published a Statement of Issues outlining their competition concerns and asked of further submissions.
The two milk processing plants in question are at Laverton North in Victoria and Erskine Park in New South Wales, and the ACCC expressed serious concerns at reduced competition in the central coast area of New South Wales and impacts on other processors. In eastAUSmilk’s view, this impact could be felt from central NSW up into southern Queensland.
While many NSW members of eastAUSmilk have a good working relationship with Coles, some dairy farmers are concerned that if Coles owns the NSW facility it could impact where northern NSW and southern Queensland milk is processed, and hence the viability of production.
The ACCC review is only part of the story, though. Their review is conducted on very narrow grounds – the incremental change to competition in the market, caused by the proposed acquisition.
They are not allowed to:
consider social aspirations shared by all Australians – ongoing access to locally sourced fresh milk, a vibrant dairy industry, regional community resilience, fairness between big business and small, and so on,
address the total effect on competition that the acquiring company will have, nor
treat this as a precedent for agricultural supply chain vertical integration.
The ACCC say they will announce a revised decision date in due course.
Mike Smith, eastAUSmilk Government Relations Officer
Processors want the Dairy code of practice watered down
The code of practice has been in place for 3 years now and has had a significant impact on improving competition in the industry. It has created a fairer and more balanced bargaining between processors and farmers and this is exactly what the code was introduced for.
Farmer advocacy groups including eastAUSmilk and Australian Dairy farmers where key advocates for introducing the code whereas processing representatives tried to block the introduction of the code. A special thanks to Craig Hough from Australian Dairy Farmers who was key to drafting the code. Craig finished his time at Australian Dairy Farmers last week and his knowledge, drive for change and enthusiasm will be sorely missed.
Some processors are now complaining that the code does not give them enough flexibility when competition between processors drives the price to farmers up. These processors and their representatives want the code watered down so processors can reduce prices to farmers like the bad old days pre the code. This will allow processing companies worth billions of dollars to once again dictate to the small family farms that supply them. Their attitude is not surprising since processors were opposed to the code and have never wanted farmers to have any more bargaining power.
Some processors have competed well in the market to attract additional milk supply. The code has allowed this to happen much more readily than it was previously. Are these processors, who want to compete for and attract milk, also complaining that the code needs to be watered down? I would think not.
I would note that processors have identified the boundaries of the code and found out what they can and can’t do. In several areas, this means the intent of the code is not translated into practice. This appears a more significant issue to me than complaints by processors that small family businesses now have too much power over multi-billion dollar companies.
Eric Danzi, CEO eastAUSmilk.
eastAUSmilk AGM
EastAUSmilk’s Annual General Meeting was held in Pittsworth, Queensland on Wednesday 30 August, following last year’s in Lismore, New South Wales. Members from both New South Wales and Queensland attended, as well as staff.
In his report, President Matt Trace highlighted the impact of floods on members, as well as milk pricing issues, and the need to build eastAUSmilk’s profile amongst non-members. Chief Executive Officer Eric Danzi attended via Zoom because he was at an important Dairy NSW Member Event in Merimbula New South Wales. His report stressed the strategic plan developed by the Board, and member services. Auditor Alan Teese, from Gillow and Teese, discussed the financial report with members, and all reports were subsequently accepted.
An ”other business” agenda item allowed members to raise further issues from the floor of the meeting.
Members at the AGM were then welcomed to Peter Garratt’s nearby Southbrook dairy farm, where Peter spoke in detail about his feed and nutrition practices, which enable significantly higher carrying capacity, and hence profitability, than pasture feeding alone.
In conjunction with the Annual General Meeting, eastAUSmilk’s Board also met in person, and considered issues as wide-ranging as the Northern Dairy Plan, artificial insemination, dairy beef exports, and Bermuda grass. They also received an update on government relations matters, particularly including Government funding of dairy programs, and the proposed purchase of two Saputo milk processing facilities by Coles. The Board also considered briefly greater use of technology, to allow on-line attendance at future Annual General Meetings by members who couldn’t be there in person.
Both the Board and the Annual General Meeting spent time discussing the very positive membership growth in New South Wales following the amalgamation of Dairy Connect and QDO, and regional visits by the CEO.
Mike Smith, eastAUSmilk Government Relations Manager
eastAUSmilk presses Federal Minister on Competition
eastAUSmilk has continued to actively pursue priority issues, and this week met with senior advisors to the Commonwealth Minister for Agriculture, Fisheries and Forestry, Murray Watt.
Chief Executive Officer of eastAUSmilk Eric Danzi and Government Relations Manager Mike Smith discussed at length with the Minister’s advisors the proposed purchase by Coles of Saputo milk processing plants in New South Wales and Victoria, with a focus on the issues of concern already identified by the Australian Competition and Consumer Commission.
The ACCC has expressed concern about the impact of this proposed acquisition, and noted it could see fewer processors competing to purchase and process milk in the New South Wales central coast region, and potential impacts on other processors and dairy farmers further away.
Their preliminary report can be downloaded from the ACCC website, and they propose to release their final findings about this proposed acquisition on September 14.
eastAUSmilk stressed to the Minister’s advisors that the outcome, if this sale goes ahead, must see the market for milk throughout New South Wales and Queensland deliver fair and effective competition, and no reduction in the milk sale options open to farmers.
The meeting also discussed in detail the need for an urgent review and updating of the Dairy Industry Code, and the kind of changes eastAUSmilk wants to see. A review of the Code is due this year, and eastAUSmilk has requested that it proceed without delay.
eastAUSmilk has sought a commitment from the Minister’s office, and his department, that they will continue to discuss a wide range of industry issues, including technology uptake by dairy farmers, sustainability and efficiency, and animal welfare.
A follow-up and more detailed discussion is planned, in relation to all of the issues raised, with the Minister’s office.
Mike Smith, eastAUSmilk Government Relations Manager
eastAUSmilk AGM
eastAUSmilk will be holding our annual general meeting on Wednesday 30th of August in Pittsworth at the Pittsworth Motor Inn. The AGM starts at 11.00am with morning tea beforehand and the AGM is due to end by 12.30pm followed by lunch.
A visit to Peter Garratt’s farm at Southbrook is also planned after lunch and is due to commence around 1pm. Peter is one of the leading young farmers in the industry who has transformed his farm over the past 10 years and almost tripled production during this time. Peter is largely a TMR farm and averages over 30L/ cow per day and is a great example to other farmers on what they can do. This farm visit will highlight some of his latest farm improvements including GPS sprayers, concrete silage pits and covered feedpad as well as plans for future development.
This will be followed by a dinner at 7pm with guest speakers Rob Cooper from NSW Department of Primary Industries, who is the chair of the NSW Dairy Action Plan. Rob will speak about the implementation of the NSW dairy action plan including changing farming systems, attracting new entrants and encouraging farmers to expand their business.
Ben Tarrant from Darling Downs Precision will also speak at the dinner. He will discuss the applications of technology including the Weed-IT precision sprayers. The sprayers detect the weeds and only sprays them which saves up to 90% on chemical usage.
The farm visit and dinner are open to all who would like to attend. We look forward to a good turnout with a good number of members having already RSVP’d. We are looking forward to catching up with all attending, if you haven’t yet RSVP’d and would like to attend, please contact us on 07 3236 2955.
Letisha Johnson, eastAUSmilk Project Officer
eastAUSmilk Johne’s Testing
BJD- Bovine Johne's Disease is caused by the bacteria Mycobacterium avium subsp. Paratuberculosis(MAP). It causes diarrhoea, weight loss, reduced milk production and eventually death. It is an incurable disease and although mainly contracted by young stock, it is not often evident for several years, due to the long incubation period.
The dairy industry is working hard to keep BJD out of herds by proactively managing calf rearing conditions and being extra diligent with the importing of stock onto their properties. The Johne’s Disease Dairy Score was developed to help manage associated risks of infection, with active biosecurity plans and biannual herd testing.
Over the past few months, eastAUSmilk has been busy collecting samples from our members farms for their scheduled BJD testing. We have had 118 farms participate in testing, from the Atherton Tablelands QLD to Comboyne NSW.
It has been great to get onto so many farms and chat to our awesome farmers in person. Getting to experience the diversity between different farms, due to location, available services and weather conditions, has given me greater insight into ways to support more farms moving forward. The high standard these farms are operating at is impressive to say the least.
Just a note moving forward, for those needing BJD test results for Qld RNA entries, testing needs to be completed at least 3 months before, to allow the laboratory time to process the results.
Many thanks to all the farms for working in with collection times and days, it helped make the process run smoothly which was much appreciated.
Letisha Johnson, eastAUSmilk Project Officer
Coles and Saputo Sage Continues
Submissions to the Australian Competition and Consumer Commission, on their concerns about the proposed acquisition of Saputo milk processing plants by Coles, closed on 3 August. The ACCC currently propose to make their final findings by 14 September.
In their statement of issues published in July, ACCC raised several areas of concern. They believe it is possible that sale of the Erskine Park (NSW) facility could see significantly less competition in the market for fresh milk, in several regions of NSW, and they are also concerned at the impact on the dairy industry if Coles decides to move processing from further north, or elsewhere, to the Erskine Park facility.
eastAUSmilk has made a submission in response to the concerns raised by the ACCC, and stressed they are not trying to force Saputo to hang onto milk processing plants they don’t want, nor that Coles will harm the dairy industry recklessly. Rather, the eastAUSmilk submission stressed that the competitive advantage which would be enjoyed by Coles if they bought the plants, and the production opportunities they represent, would most likely see Coles make changes to their operations which could drastically impact markets as far north as southern Queensland.
The solutions proposed by eastAUSmilk focused on keeping competition in the NSW market for fresh milk, by encouraging Saputo to go to market with their plants, to see if other milk processors are interested, or alternatively encouraging a joint venture between Coles and another processor or attach conditions to the sale which protect competition. In all cases, eastAUSmilk urged that the Dairy Industry Code be updated to address both this proposed purchase, and any other proposals for vertical integration in the industry.
eastAUSmilk has offered to work with ACCC to develop each of these proposals, because any solution will work better if it has dairy farmer input.
Mike Smith, eastAUSmilk Government Relations Manager
EastAUSmilk Congratulates ACCC for Processor Prosecution
EastAUSmilk CEO Eric Danzi has congratulated the Australian Competition and Consumer Commission for action taken to ensure the integrity of the Dairy Industry Code of Conduct, by prosecuting Lactalis, a large milk processor operating in all states.
The Federal Court found Lactalis had entered into contracts with farmers, which included terms allowing Lactalis to unilaterally terminate agreements for irrelevant behaviour, including when, in Lactalis’ opinion, the farmer had engaged in “public denigration” of processors, key customers or other stakeholders. In other words, contracts were designed to smother dairy farmers engaging in public debate about their industry!
In some cases, famers have no say over the content of contracts, and must sign the contract drafted by the processors, to sell their milk.
The Court also found that Lactalis had breached the Code by failing to publish milk supply agreements on its website.
Lactalis was fined nearly $1 million.
A review of the dairy code is due now, and eastAUSmilk has called on the Federal government to make that review urgent, so loopholes which have become apparent since it commenced can be addressed, and it remains effective and relevant. They also believe it needs to address vertical integration in the dairy supply chain, to protect dairy farmers from potential misuse or market power, as well as minimum pricing in long term contracts, and several other improvements.
EastAUSmilk has met with Ministers or their offices, and departments, in the New South Wales, Queensland, and Commonwealth Governments, to press the need to review the Code now. They say this Federal Court finding, and substantial fine, proves that some milk processors won’t comply with their obligations under the Code, and will try to get away with breaching it if they can. They want a Dairy Industry Code which forces processors to change the culture of bullying farmers.
Mike Smith, eastAUSmilk Government Relations Manager
Australian Competition and Consumer Commission has concerns about Coles
Following submissions from eastAUSmilk and other industry participants, the Australian Competition and Consumer Commission on 20 July published a statement setting out the issues they are concerned about, with Coles’ proposal to buy two milk processing plants from Saputo.
The ACCC noted the proposed acquisition may lead to Saputo exiting markets for the acquisition of raw milk in NSW, thereby substantially lessening competition for the acquisition of raw milk in those markets.
They also noted the proposed acquisition may substantially lessen competition by giving Coles the incentive and ability to harm or frustrate competitor businesses at various points of the dairy supply chain.
The ACCC noted a significant number of industry participants had raised strong concerns about the proposed acquisition, particularly given it will result in a major structural change as the first time a supermarket has its own milk processing facilities.
Their full statement can be downloaded from the ACCC Government website. Issues of concern to the ACCC are discussed in more detail in the ACCC's full statement.
While many NSW members of eastAUSmilk have a good working relationship with Coles, some Queensland dairy farmers are concerned that if Coles owns the NSW facility it could impact where Queensland milk is processed, and hence the viability of some Queensland production.
The ACCC Review is only part of the story, though. Their review is conducted on very narrow grounds – the incremental change to competition in the market, caused by the proposed acquisition. They are not allowed to:
consider social aspirations shared by all Australians – ongoing access to locally sourced fresh milk, a vibrant dairy industry, regional community resilience, fairness between big business and small, and more,
address the total effect on competition that the acquiring company will have, nor
treat this as a precedent for agricultural supply chain vertical integration.
EastAUSmilk is likely to make further submissions to ACCC about the issues they have raised.
Mike Smith, eastAUSmilk Government Relations Manager
EastAUSmilk meets More Decision-Makers
Last week, eastAUSmilk’s team met with officers of the Federal Treasury Department, and advisors to New South Wales Minister for Agriculture, and Regional and Western New South Wales, Tara Moriarty.
eastAUSmilk Chair of the Board Matt Trace and Government Relations Manager Mike Smith talked with Treasury about the Australian Competition and Consumer Commission review of the proposed purchase by Coles of two Saputo milk processing plants. They also pressed the case for review and updating of the Dairy Industry Code. The Treasury officers were very interested in the proposition that some of the processors have begun to work out ways around the provisions of the Code, and agreed to meet eastAUSmilk again, once the ACCC announces the results of their review, on 20 July.
The discussion with Minister Moriarty’s advisors covered the same Coles and Saputo issues, and changes needed to the Dairy Industry Code, as well as industry sustainability measures, animal welfare issues, and foot and mouth disease preparedness. eastAUSmilk and the Minister’s office will get back together soon for further discussions, and some of the topics covered will also be discussed with New South Wales’s Department of Primary Industries, in the near future.
Minister Moriarty was invited to visit a dairy farm, and eastAUSmilk promised to show her the basics of how a dairy farm works. She was also invited to an eastAUSmilk Board meeting.
As with all of the meetings held with Ministerial Offices and Departments over the past several weeks, eastAUSmilk has found discussions to be positive, and constructive, and in all cases there’s a commitment to continue them.
Mike Smith, Government Relations Manager eastAUSmilk
EastAUSmilk meet with Ministerial Officers in Canberra
Queensland dairy farmer and eastAUSmilk Board Chair Matt Trace, and Government Relations Manager Mike Smith, were in Canberra last week, discussing important issues with public servants and Ministerial Offices. Amongst others, they met with Department of Agriculture, Fisheries and Forestry, and advisors to the Assistant Minister for Competition Andrew Leigh and Treasurer Jim Chalmers.
Competition policy, and the proposed purchase by Coles of Saputo milk processing plants in Victoria and NSW, were discussed with everyone, and the need for an urgent review of the Dairy Industry Code was stressed. eastAUSmilk made it clear the industry needs more milk processor competition, not less. Other issues raised included industry sustainability opportunities and needs, structural reform of industry bodies, extending Queensland’s previous “fair go” marketing campaign, animal welfare, and foot and mouth disease.
The eastAUSmilk team were at pains to stress that while some dairy farmers can look forward, plan, and invest, many are still struggling under debt and stress arising from dollar-a-litre milk, drought, floods, and other pressures beyond their control. This impacts the capacity of the industry to withstand unreasonable or uncompetitive behaviour by processors or big retailers, such as milk prices not matching increases in farm input costs.
They also stressed competition laws are fundamentally flawed when no consideration is given by Australian Competition and Consumer Commission or Government to issues such as ongoing access to locally sourced fresh milk, regional community resilience, fairness between big business and small, and more.
More meetings will be held in the next week, to ensure politicians and public servants at every level understand current conditions in the industry, and the importance of these issues to dairy farmers.
ACCC expects to announce the results of their review of the proposed Coles/Saputo deal on 20 July. Their options include waving it through, rejecting it, or raising competition issues to be addressed. A further round of discussions is planned once that review is finished.
Mike Smith, Government Relations Manager eastAUSmilk
Visit to the ACCC
EastAUSmilk Chief Executive Officer Eric Danzi and Government Relations Manager Mike Smith met with Australian Competition and Consumer Commission in Sydney last week, to discuss the proposed purchase by Coles of Saputo processing plants in Laverton North (Victoria) and Erskine Park (New South Wales). The ACCC is investigating the impact on competition of the proposed acquisition.
Unfortunately, the ACCC’s investigation is very narrow, and pays zero attention to the aspirations shared by all Australians – ongoing access to locally sourced fresh milk, regional community resilience, fairness, and the like. They are also unable to take account of the appalling record of the major retailers in treating dairy farmers like serfs.
EastAUSmilk has made a strong submission opposing the acquisition, and the discussion with ACCC focussed on the content of what the submission said.
Politicians in Queensland, New South Wales and Federally will be actively pressed by eastAUSmilk to ensure the acquisition is blocked.
Errol Gerber and Joe Bradley, both eastAUSmilk District Councillors, plus Government Relations Manager Mike Smith, showed Queensland’s Minister for Agricultural Industry Development and Fisheries Mark Furner around Errol’s Clarendon dairy farm last week.
As well as showing the Minister over farm operations, the eastAUSmilk bent the Minister’s ear about a very wide range of topics, amongst which Joe was able to talk about his experience with Queensland Government dairy industry programs, particularly taking up smart collars for monitoring individual and herd well-being.
Discussion ranged over Tick Virus vaccine supplies (the Minister told us his department promises they will be available from next week), farmgate pricing concerns, industry resilience & drought/disaster preparation, improvements to various Government programs, and Coles’ proposed purchase of Saputo processing plants. During discussions the Minister mentioned his grandfather was a dairy farmer, and he had spent time on the property back in hand-milking days.
Mike Smith, Government Relations Manager eastAUSmilk
FBRP plans & workshops
Over the course of the last 2 years, eastAUSmilk has been involved in delivering workshops and assistance to dairy farmers in completing farm resilience plans and subsequent Drought Preparedness Grant applications. Since November 2022, we have completed 12 resilience plans in preparation for DPG applications and held five workshops across Qld and northern NSW. We are happy to report that this means we have met the milestone for the project and exceeded all goals for the last 6 months, and plan to continue in this fashion over the next two reporting periods.
Challenges faced during this milestone were mainly timing of workshops, as many farms were already busy with planting when the workshops were planned. This was combated in the last workshop by holding it at night as a dinner, and although this limited available speakers, we had a good turnout of 14 attendees on the night.
Heading into the new financial year we anticipate more grant applications from farms who have already completed their resilience plans, which not only allows them to refer to a plan in writing for events such as droughts, but also means that they can put through their applications much quicker as it only needs to be reviewed and updated rather than completing a new plan.
eastAUSmilk has had an excellent acceptance rate for the grant applications and we look forward to continuing to provide this service to our members over the coming financial year. We also plan to hold additional workshops which in future will be held as dinners to accommodate the busy schedules of our dairy farmers.
Letisha Johnson, Project Officer eastAUSmilk
Milk Price Increasing Painfully Slow
All processors have now released their starting milk prices for 2023/24 and both Bega and Lactalis have increased their price very slightly since. It is disappointing that prices have remained low and no processor appears keen to lift the price significantly to make it attractive for farmers to sign a contract. It is unclear why this is, but it appears that keeping the farmgate price low is more important to processors than picking up milk. It appears Norco has already signed a significant number of new suppliers while it doesn’t appear that Bega or Lactalis have signed many to date.
It is very difficult to tell what the average price is likely to be for each processor since all processors have an incentive to make their price look as good as possible rather than report accurate numbers. However, it is likely that Bega, Lactalis and Norco are all between 88 and 90c/L.
What is very clear is there are significant variations for individual farmers between processors due to different payment systems. This variation could be up to 6c/L on some farms which is an astonishing variation. As a result, it is extremely important for all farmers to get estimates of all processors before making decisions about their future.
All processors have moved to multi-year contracts now which will stifle milk price increases in the future. However, this makes it even more important for processors to compete for milk now and secure all the milk they can since they will not be able to attract milk for at least 2 years in the northern market.
It will be interesting to see if any processors make a decisive move re price to attract farmers signatures. Many farmers are waiting for this to occur and are unlikely to sign any contract until this happens.
Eric Danzi, CEO eastAUSmilk
Commonwealth Government figures get their feet dirty.
eastAUSmilk was pleased to help Commonwealth Government figures get their feet dirty as they checked out a working dairy farm last week.
Glamorgan Vale dairy farm Tim Beattie hosted Treasurer Hon Dr Jim Chalmers MP, Minister for Agriculture, Fisheries and Forestry, Senator the Hon Murray Watt, and local Member of Parliament Hon Shayne Neumann, and showed them over his dairying operation.
The three Labor Members of Parliament were given a thorough briefing from Tim on how the enterprise operates, and the issues impacting dairy farmers.
eastAUSmilk President Matt Trace, Board member Kay Tommerup, and member Errol Gerber were also on hand to help ensure the visitors took away the best possible understanding of industry issues.
The eastAUSmilk team pressed the Labor MPs on many issues of great importance to dairy farmers: the behaviour of major retailers, inadequacies of current competition regulation and the Dairy Industry Code, business resilience and planning, on-farm technology uptake, animal welfare, and more.
The four dairy farmers spoke firsthand of the fears of dairy farmers across three states at this proposal for Coles to purchase milk processing plants from Saputo in New South Wales and Victoria. Such an unprecedented level of control over the supply chain would allow Coles to severely impact the business of competitors, and once more drive farmgate milk prices down to poverty levels, as they and Woolworths did with dollar-a-litre milk. The Australian Competition and Consumer Commission is currently reviewing the proposed purchase but can review only narrow competition issues.
eastAUSmilk wants the Commonwealth Government to address this proposed purchase by looking more broadly at fairness, the need for a sustainable and profitable dairy industry, regional community resilience, and the community’s ongoing demand for locally sourced fresh milk.
While the MPs listened intently and asked good questions, dairy farmers will be looking for concrete action.
Mike Smith, eastAUSmilk Government Relations Manager
Get quotes from all processors and be decisive!
All processors have now released their starting milk prices for 2023/24 and it is time for all dairy farmers to properly explore their options. All farmers who are off contract should speak to all processors who may want their milk and get estimates from everyone before making decisions about their future.
As reported last week, Lactalis has announced a 5c/L reduction in price to around 82c/L on average. Norco, DFMC and Bega have all lifted payments to farmers by around 1c/L and all are estimated to average around 88c/L. However, there is no such thing as an average farmer so there will be great variation as to which processor would pay an individual farmer the highest price which is why you must get actual estimates from everyone.
If farmers can pool together to form a considerable volume of milk, this will assist greatly in discussions with processors. The larger the volume of milk the greater the incentive for processors to pay a higher price and therefore the higher the price that farmers can achieve. At least 10ML is required to gain significant bargaining power for farmers. But having 20ML will significantly increase what a processor would pay since it would solve their milk shortage problems with 1 transaction.
I strongly encourage dairy farmers to be proactive and sign a contract that is commercially attractive. There is a 14-day cooling off period so if another processor offers a higher price and the processor you signed with won’t match, you can rescind the contract and sign with someone else.
Farmers need to act commercially and as a result encourage processors to do the same.
Eric Danzi, CEO eastAUSmilk
Farmers disgusted as Lactalis announces a 5c/L drop in milk price
Dairy farmers in Queensland and northern NSW were caught off guard when Lactalis announced a 5c/L drop in milk price. The surprise soon turned to anger and many Lactalis suppliers have reached out to me expressing their disgust. Given the massive shortage of milk in Australia, especially in Queensland and NSW, this announcement makes no sense at all.
It appears to be a poorly thought-out strategy designed to suppress milk price. It is now likely that the strategy will backfire on Lactalis. It is incredibly unlikely that Bega, DFMC and Norco will follow suit and as such Lactalis is likely to lose a lot of milk to other processors from their bold strategy.
Everyone in the industry recognises that there is a massive shortage of milk and the loss of around 0.5 billion litres of milk in Australia in the past year demonstrates this clearly. Also, it is well understood that the cost of getting fresh milk into Queensland from Victoria is at least 10c/L more expensive than procuring milk from local farms in Queensland and northern NSW. So regardless of what is happening to milk price in Victoria, milk prices in the northern industry must go up this year.
What should Lactalis do? If they don’t want to lose at least 50ML of milk in Queensland and northern NSW, and perhaps closer to 100ML, they should immediately correct their mistake and remove the minus sign from their announcement. Anything less than a 5c/L increase will not quell the storm created by their announcement on Friday.
So, what should Lactalis suppliers do? Do not sit back and wait and hope for the best. To sit back and wait for things to unfold is an incredibly poor strategy and one that gives complete control to others. I strongly encourage all Lactalis suppliers speak to all other processors and be blunt about what price would get them to immediately sign a contract with another processor. Most dairy farmers would tell you that given cost increases, anything less than a 3c/L price increase is tokenistic and not worth signing a contract for. Many Lactalis suppliers have already told me this is what they are doing.
I strongly encourage dairy farmers, both Lactalis and other dairy farmers, that if a processor is prepared to offer a reasonable price increase on this year’s price, be proactive and sign a contract with then immediately. There is a 14-day cooling off period that farmers can take advantage of after signing a contract. So, if another processor offers a higher price and the processor you signed with won’t match, you can rescind the contract and sign with someone else.
Processors who are proactive and prepared to offer reasonable price increases early must be rewarded with farmers signing contracts. If they are not, why would they bother offering a reasonable price? The answer is they shouldn’t.
The power is in the hands of every dairy farmer. Take advantage of this and sign contracts this week if a decent price increase is offered.
Eric Danzi, CEO eastAUSmilk
ACCC must block Coles from buying 2 Saputo plants
The ACCC is currently undertaking a review of the proposed acquisition of 2 Saputo processing plants in NSW and Victoria by Coles. We have this week put in a submission to ACCC outlining that competition will be significantly reduced by Coles becoming a processor and therefore the ACCC must block this purchase. We believe, like many dairy industry stakeholders including farmers and processors, if the Coles acquisition is approved it will substantially lessen competition in the market.
EastAUSmilk believes the impact on competition from this proposed acquisition is vastly different and far greater than one processor acquiring another processor’s facilities. It would give Coles the ability to destroy processors, processor brands and farmers by completely controlling the supply chain. It would allow Coles to abuse its power to completely control and destroy the market and its competitors. If approved, the northern dairy industry would be under significant threat including farmers, processors and retailers.
Some Saputo suppliers are very concerned that this acquisition could have detrimental effects on Saputo. It could cause Saputo to exit the industry or at least some regions which would have a substantial impact on competition. This would cause competition to decrease.
For the first time a processor would set the wholesale and retail price of their products. And alarmingly, a processor for the first time will be setting the wholesale and retail price of all their competitors. This will allow Coles to dictate the viability of all processors and their brands. Given the history of Coles destroying processor and farmer margins and viability historically, it is to be expected that they will do the same again.
EastAUSmilk will be discussing our concerns with the Federal government and asking them to intervene to block this proposed acquisition. We would like to see the government impose a substantial lessening of market power in the supply chain from Coles not let them further increase their power.
Eric Danzi, CEO eastAUSmilk